Sainsbury's Online Food Delivery Investment Decision Report Analysis

This report provides a comprehensive analysis of Sainsbury's decision to invest in online food delivery, motivated by the COVID-19 pandemic and the growing demand for online services. It examines the motivation behind the investment, including the potential to capitalize on changing consumer behavior and expand the company's customer base. The report employs investment appraisal techniques, specifically the Net Present Value (NPV) method, to assess the financial viability of the project. The NPV calculation indicates a positive outcome, suggesting the investment is financially sound. Furthermore, the report addresses the risks and potential returns associated with the investment, including financial burdens, brand value concerns, and the potential for increased sales and profitability. It also provides recommendations, such as forming strategic alliances and focusing on digital marketing, to maximize the success of the investment. The report concludes that Sainsbury's expansion into online food delivery is a strategic move with significant potential for growth and market share enhancement.

ACCOUNTING AND
FINANCE FOR DECISION
MAKING

Table of Contents
INTRODUCTION.................................................................................................................................3
MAIN BODY........................................................................................................................................3
Motivation of proposed investment...................................................................................................3
Investment appraisal technique..........................................................................................................4
Risk and return of investment and potential impact...........................................................................6
CONCLUSION.....................................................................................................................................7
REFERENCES......................................................................................................................................8

INTRODUCTION
Investment decision making is about to make decisions in respect to business entity in
such manner that company can attract to more growth opportunities in the respective market.
This report is based on the case study of Sainsbury Company in respect to its investment
decision making. The organisation was established in the year 1869 by the founder John
James Sainsbury. Headquarter of the company is located in London, United Kingdom.
Company is currently dealing in retail sector with support of different products such as
hypermarket, supermarket, super store, and convenience store and fore court shop. This
report will discuss about the business expansion project proposed by the company.
Henceforth, the emphasis of the study is over motivation behind the proposed investment
proposal. Investment appraisal will also conduct to assess the economic feasibility of the
respective project. Furthermore, the aim of the project is to understand different risk, return
and potential impact of this decision over the business of company. Necessary
recommendations will also be a part of this project.
MAIN BODY
Motivation of proposed investment
Sainsbury Company is looking to expand its business operations by entering into the
online food delivery business. This is also a part of the retail sector but personally
demonstrate as the food retailing business. The current situation of the covid pandemic has
motivated the business houses to touch the new business area that can allow the company to
earn heavy return based on the current situation. It has been anticipated that the covid 19
pandemic is still suffering to the business sector irrespective of the people got vaccinated
twice in United kingdom still the predictions are there related to the new and advanced wave
of the virus that could further imposed the lockdown like situations again (Ahmad, Connolly
and Demirag, 2021). The earlier damage has already been occurred over the business
premises of the Sainsbury Company where it has to shut the door off for all its stores due to
the lock down situation.
The motivation behind the idea of online food delivery has come in the mind of the
management of Sainsbury Company because of the current covid 19 situation. The outbreak
has been massive and this is important for the companies like Sainsbury Company who only
operate in United Kingdom and the Ireland so there is a less possible opportunity for the

management of company to stop the operation flow and still sustain the entire business. Also
this business expansion decision is future oriented as the demand of the online food delivery
app has become massive especially after the coivd situation (Arribas-Ibar, Nylund and Brem,
2021). Company and its management have aimed to take competitive advantage by entering
into the business area. Also the demand will support the company to maximise its return.
Sainsbury Company is operating its business operations since the year 1869 that clearly
indicate that the business entity must hold a huge amount of customer base. In such a
situation this will favour the company entertain the huge success even in the initial stage of
the business. The major plan of the company is to maximise its future growth with support of
the launch of new food delivery app by the Sainsbury Company in United Kingdom.
Investment appraisal technique
Investment appraisal technique is a process to monitor the investment decision
making of the business entity. This process is about to analysis the profitability and the
economic aspect of the business investment decision making. Under the process total
estimated investment that company will make in the investment proposal and the expected
cash inflow that organisation will generate out of the business operation entertain. Both the
factors are analysed to understand the profitability of the investment proposal. The world has
gone over internet and especially the business environment understand the need of the
internet and online services like e-commerce transfer and many other to maximise the future
growth of company. Today the behaviour of the customers has also changed massively where
it always prefer online mode of trading to save both time and money (Habel and et.al., 2020).
The covid 19 pandemic is also associated with the guidelines given by the world health
organisation that motivated the people to not to go out from home without any valid reasons
and the preferences are must be allocated to staying home in the pandemic situation. As a
consequence of all the situational aspects people started staying at home to protect the health
from deadly virus. In United Kingdom people like to go out at restaurant and hotels to enhjoy
the delicious food and make the evening memorable. Due to the pandemic people started
ordering food online as they cannot witness the restaurant and other dining experience.
The consequence of the pandemic situation could allow the drastic change in the
business environment especially related to the online food delivery platform. The recent
statistics clearly denote that online food delivery business is contributing almost 10% of the
entire hospitality sector of the country (Hao, Xiao and Chon, 2020). Many business reports
has also predicted that the e-commerce growth in food retailing area will emerge massive in

future that approximately 35% of the overall sales of the restaurant will emerge out of the
online food delivery business by the 2025. This is a huge number that clearly state that the
business expansion decision made by the Sainsbury Company will prove as a positive step
towards the overall success of the business entity.
Net present value technique
This is the technique to understand the profitability of the investment decision
making. This is the widely used tool to analysis the investment appraisal technique as it
involve predicted investment of the project and also the projected cash flow that company
will entertain against the investment decision making made. The difference between the
investment and the future cash flow predicted will be ether profit or the loss for the company.
In case of profit the investment decision making will be selected by company.
Years Project cash flow PV value at the rate
of 12%
Accumulated pv of
cash inflow
0 (1500000) (1500000)
1 500000 .893 446500
2 550000 .797 438350
3 565000 .712 402280
4 615000 .636 391140
5 750000 .567 425250
Accumulated cash inflow 2073520
Net present value:
Present value of cash inflow – Initial Investment
= 2073520 – 1500000
= 5073520
The above projected calculation clearly demonstrates that the company will get the
advantage of 5073520 if it invests in the new upcoming e-commerce model designed by the
company. The investment decision will derive the positive results as the overall potential cash
inflow ate more than the initial level of investment in business (Kaczmarek and et.al., 2021).

The cash flow are only predicted for the five year tenure thereafter also the company will
gain the inflow from the business. This is the investment cost projected above are associated
with the equipment and tools used to run the e-commerce set up for the online food delivery
business operations.
Risk and return of investment and potential impact
Every business expansion and investment decision contains some level of potential
risk involved in it. Risk is always a part of the business operations. The new investment
decision making will create a financial burden over the Sainsbury Company. The risk is
always a part of business and that is associated with the entertaining losses in the business.
Financial resources are further limited in number that will further create a extra pressure over
the management of company to address profit against the decision made. Risk of failure is
always a part of the business expansion decision made by the company (Sa'adah, Silviana and
Fitri Sukmawati, 2021). Loosing brand value can also a potential risk element associated with
this decision company make. As the company is not well established in the sector that make it
more challenging for the business entity to engaged positively with all different challenges
and hurdle part of the business.
The new business expansion decision will allow the Sainsbury Company to maximise
its overall sales volume of company. The impact of this decision will be very positive as due
to the pandemic situation the sales of company have gone down already. The impact of this is
possible that company can maximise its sales in market. Furthermore, this will boost the
overall growth of the company. It has anticipated that this decision will boost up overall
turnover of Sainsbury Company by 20% to 30% (Squazzoni and et.al., 2020). This is a huge
boost up in the overall sales of the company. The profitability of the Sainsbury Company is
also anticipated to increase by 20% due to this decision made by company. This will further
create positive impact over the liquidity situation and the potential rise in the stock market
performance of the Sainsbury Company. The key impact is anticipated that out of the
business expansion decision made by company is in the form of enhancement of the potential
customer base of company. This new business decision will surely attract to plenty of new
potential customers in favour of the business entity. This will certainly a huge remark for the
company to entertain more number of potential customers in respective market.

CONCLUSION
Sainsbury Company is planning to enter into the online food retailing sector. This is a
decision company has taken by seeing at the exiting covid 19 pandemic situation. The result
of the pandemic is such that companies like Sainsbury Company have to shut its doors due to
the lockdown situation in country. This is ascertain that due to the business expansion
decision Sainsbury Company will be able to attract more number of sales in the market. Also
the business entity will capable to attract more number of potential customers beyond the
existing slot of the organisation. This will create a positive impact over the overall
performance of the business entity in respective market.
It is recommended that Sainsbury Company should form strategic alliances with all
top restaurant chains and all other kind of food chains so that proper variety are given to the
customers. This is essential that company should keep it profit share low especially at the
initial stage of the business life cycle (Talwar and et.al., 2021). This will potential maximises
the return of the business. It is recommended that Sainsbury Company hold focus over social
media and digital channels for marketing the new business idea. This will create a hike in the
market towards the new service launch by the Sainsbury Company.

REFERENCES
Books and Journals
Ahmad, S., Connolly, C. and Demirag, I., 2021. Testing times: governing a pandemic with
numbers. Accounting, Auditing & Accountability Journal.
Arribas-Ibar, M., Nylund, P. A. and Brem, A., 2021. The risk of dissolution of sustainable
innovation ecosystems in times of crisis: The electric vehicle during the COVID-19
pandemic. Sustainability. 13(3). p.1319.
Habel, J. and et.al., 2020. Industrial buying during the coronavirus pandemic: A cross-
cultural study. Industrial Marketing Management. 88. pp.195-205.
Hao, F., Xiao, Q. and Chon, K., 2020. COVID-19 and China’s hotel industry: Impacts, a
disaster management framework, and post-pandemic agenda. International journal
of hospitality management. 90. p.102636.
Kaczmarek, T. and et.al., 2021. How to survive a pandemic: The corporate resiliency of
travel and leisure companies to the COVID-19 outbreak. Tourism Management. 84.
p.104281.
Sa'adah, D. N., Silviana, D. A. and Fitri Sukmawati, K. S., 2021. Controversy Analysis
Rolled Out Copyright Law in the Era of Pandemic Covid-19 Linked To Investment
Needs And Job Creation in Indonesia. Turkish Journal of Computer and
Mathematics Education Vol. 12(8). pp.1010-1020.
Squazzoni, F. and et.al., 2020. Computational models that matter during a global pandemic
outbreak: a call to action.
Talwar, M. and et.al., 2021. Has financial attitude impacted the trading activity of retail
investors during the COVID-19 pandemic?. Journal of Retailing and Consumer
Services. 58. p.102341.